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Decline in Non-Interest Income to Hurt Navient in Q4 Earnings
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Navient Corporation (NAVI - Free Report) is scheduled to report fourth-quarter 2024 results on Jan. 29, before market open. NAVI’s quarterly revenues and earnings are anticipated to have declined from the year-ago quarter’s reported levels.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
This Wilmington, DE-based lender’s third-quarter 2024 earnings per share (EPS) surpassed the Zacks Consensus Estimate by 21.7%. Results were driven by a rise in other income. A decline in provision for loan losses was another positive. However, a decrease in net interest income (NII) and a rise in expenses were headwinds.
NAVI has a decent earnings surprise history. Navient’s earnings outpaced estimates in three of the trailing four quarters and missed once, with an average earnings surprise of 8.89%.
Per the Fed’s latest data, consumer loan demand was at a decent level in the fourth quarter. The clarity on the Fed’s rate cut path and the stabilizing macroeconomic backdrop will likely lead the lending scenario to improve. This is expected to have supported the company’s NII in the quarter-to-be reported to some extent.
However, elevated prepayment due to student loan forgiveness and weak origination volume are anticipated to have limited the company’s revenue growth in the Federal Education Loans and Consumer Lending segments.
The consensus estimate for NII (Federal Education loan) is pegged at $40.5 million, suggesting a sequential increase of 1.2%. The Zacks Consensus Estimate for NII (consumer lending) is pegged at $119 million, implying a sequential decline of 2.4%. The Zacks Consensus Estimate for NII (Core) is pegged at $136.2 million, indicating a sequential decline of 2.8%.
In December 2024, Navient finalized an agreement to sell its Government Services business to an affiliate of Gallant Capital Partners, LLC, which is expected to close in the first quarter of 2025, subject to certain conditions. The company expects to recognize a loss related to this transaction of $25-$35 million in its fourth-quarter 2024 results.
Thus, lower gains on derivative/hedging, coupled with the recent sale of the healthcare unit, are likely to have negatively impacted other income in the fourth quarter. The Zacks Consensus Estimate for other income of $7.3 million indicates a 27% decline from the prior quarter’s reported figure.
The consensus estimate for servicing revenues is pegged at $13.50 million, indicating a 3.8% fall from the prior quarter’s reported figure. The Zacks Consensus Estimate for asset recovery and business processing revenues of $41.9 million implies a 40% fall from the prior quarter’s reported figure.
The Zacks Consensus Estimate for total non-interest income of $75.4 million indicated a significant decline from the prior quarter’s reported figure of $312 million.
Navient's cost-control measures are expected to have improved operating efficiency and reduced expenses, which are likely to have offered some support to bottom-line growth in the fourth quarter.
NAVI’s 2024 Outlook
Management expects core EPS to be $2.45-$2.50.
The Federal Family Education Loan Program segment’s NIM is expected to be in the mid-70s, while the Consumer Lending segment’s NIM is likely to be in the low 300s.
The EBITDA margin is expected to be in the high teens.
The adjusted tangible equity is anticipated to be above 80%.
What the Zacks Model Reveals for Navient
NAVI does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Navient is -32.6%.
NAVI’s activities in the to-be-reported quarter were inadequate to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for fourth-quarter earnings of 20 cents per share has been revised downward by 16.7% in the past month. Also, the figure indicates a 71.4% decline from the year-ago reported figure.
The Zacks Consensus Estimate for revenues of $151.1 million suggests a decline of 21.7% from the year-ago reported number.
Performance of NAVI’s Peers
Capital One’s (COF - Free Report) fourth-quarter 2024 adjusted earnings of $3.09 per share handily surpassed the Zacks Consensus Estimate of $2.66. The bottom line also compared favorably with $2.24 in the prior-year quarter.
COF’s results gained from higher net interest income and non-interest income and rise in loans and deposits. Also, provisions declined during the quarter. However, the increase in expenses was the undermining factor.
Ally Financial’s (ALLY - Free Report) fourth-quarter 2024 adjusted earnings of 78 cents per share handily surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line reflected a jump of 95% from the year-ago quarter.
Results benefited from a rise in net finance revenues. Further, lower expenses and a decline in credit costs provided support. However, lower other revenues a decline in net finance receivables and loans and deposits were the undermining factors.
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Decline in Non-Interest Income to Hurt Navient in Q4 Earnings
Navient Corporation (NAVI - Free Report) is scheduled to report fourth-quarter 2024 results on Jan. 29, before market open. NAVI’s quarterly revenues and earnings are anticipated to have declined from the year-ago quarter’s reported levels.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
This Wilmington, DE-based lender’s third-quarter 2024 earnings per share (EPS) surpassed the Zacks Consensus Estimate by 21.7%. Results were driven by a rise in other income. A decline in provision for loan losses was another positive. However, a decrease in net interest income (NII) and a rise in expenses were headwinds.
NAVI has a decent earnings surprise history. Navient’s earnings outpaced estimates in three of the trailing four quarters and missed once, with an average earnings surprise of 8.89%.
Navient Corporation Price and EPS Surprise
Navient Corporation price-eps-surprise | Navient Corporation Quote
Key Factors to Influence Navient’s Results in Q4
Per the Fed’s latest data, consumer loan demand was at a decent level in the fourth quarter. The clarity on the Fed’s rate cut path and the stabilizing macroeconomic backdrop will likely lead the lending scenario to improve. This is expected to have supported the company’s NII in the quarter-to-be reported to some extent.
However, elevated prepayment due to student loan forgiveness and weak origination volume are anticipated to have limited the company’s revenue growth in the Federal Education Loans and Consumer Lending segments.
The consensus estimate for NII (Federal Education loan) is pegged at $40.5 million, suggesting a sequential increase of 1.2%. The Zacks Consensus Estimate for NII (consumer lending) is pegged at $119 million, implying a sequential decline of 2.4%. The Zacks Consensus Estimate for NII (Core) is pegged at $136.2 million, indicating a sequential decline of 2.8%.
In December 2024, Navient finalized an agreement to sell its Government Services business to an affiliate of Gallant Capital Partners, LLC, which is expected to close in the first quarter of 2025, subject to certain conditions. The company expects to recognize a loss related to this transaction of $25-$35 million in its fourth-quarter 2024 results.
Thus, lower gains on derivative/hedging, coupled with the recent sale of the healthcare unit, are likely to have negatively impacted other income in the fourth quarter. The Zacks Consensus Estimate for other income of $7.3 million indicates a 27% decline from the prior quarter’s reported figure.
The consensus estimate for servicing revenues is pegged at $13.50 million, indicating a 3.8% fall from the prior quarter’s reported figure. The Zacks Consensus Estimate for asset recovery and business processing revenues of $41.9 million implies a 40% fall from the prior quarter’s reported figure.
The Zacks Consensus Estimate for total non-interest income of $75.4 million indicated a significant decline from the prior quarter’s reported figure of $312 million.
Navient's cost-control measures are expected to have improved operating efficiency and reduced expenses, which are likely to have offered some support to bottom-line growth in the fourth quarter.
NAVI’s 2024 Outlook
Management expects core EPS to be $2.45-$2.50.
The Federal Family Education Loan Program segment’s NIM is expected to be in the mid-70s, while the Consumer Lending segment’s NIM is likely to be in the low 300s.
The EBITDA margin is expected to be in the high teens.
The adjusted tangible equity is anticipated to be above 80%.
What the Zacks Model Reveals for Navient
NAVI does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Navient is -32.6%.
Zacks Rank: The company currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NAVI’s activities in the to-be-reported quarter were inadequate to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for fourth-quarter earnings of 20 cents per share has been revised downward by 16.7% in the past month. Also, the figure indicates a 71.4% decline from the year-ago reported figure.
The Zacks Consensus Estimate for revenues of $151.1 million suggests a decline of 21.7% from the year-ago reported number.
Performance of NAVI’s Peers
Capital One’s (COF - Free Report) fourth-quarter 2024 adjusted earnings of $3.09 per share handily surpassed the Zacks Consensus Estimate of $2.66. The bottom line also compared favorably with $2.24 in the prior-year quarter.
COF’s results gained from higher net interest income and non-interest income and rise in loans and deposits. Also, provisions declined during the quarter. However, the increase in expenses was the undermining factor.
Ally Financial’s (ALLY - Free Report) fourth-quarter 2024 adjusted earnings of 78 cents per share handily surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line reflected a jump of 95% from the year-ago quarter.
Results benefited from a rise in net finance revenues. Further, lower expenses and a decline in credit costs provided support. However, lower other revenues a decline in net finance receivables and loans and deposits were the undermining factors.